Alternative investments for expats from wine to classic cars

You don't have to be a millionaire to invest in luxury items that could help
make you a little bit richer

The Knight Frank Luxury Investment Index showed nine assets that increased in value by 179pc in a decade. The top investment was cars such as these vintage Ferraris, which shot up 456pc.
Photo: Dan Kitwood/Getty Images

Alternative investments such as wine, art and classic cars are often considered the preserve of the super wealthy, but it is possible for interested investors with smaller portfolios to get involved too.

The Knight Frank Luxury Investment Index is continuing to rise – up by 8pc in the 12 months to the end of Q3 2013 – proving there are significant returns to be had.

In a 10-year period, the index has grown by 179pc, which significantly outperforms mainstream investments like the FTSE 100, with classic cars leading the way. In 10 years, the value of classic cars has gone up a massive 456pc, with stamps and coins also faring well at 250pc and 227pc respectively.

Art (up 193pc), wine (up 176pc) and jewellery (156pc) have also helped to boost the performance of the index overall, while collectable furniture is the one luxury asset class that has fallen in value over the period (down 19pc).

The classic car market is one that is burgeoning, and the ability to actually drive your investment is certainly a draw. There are also some perhaps surprising models that are attracting interest at present.

You do not have to buy a car as you can also invest in a classic car fund. One of the most recent to be launched was the PHD Classic Car Fund, which give you the chance to drive the cars for up to 50 days for a £200,000 investment. Each car in the portfolio is valued at more than £300,000, and expats can find out if they qualify to invest by contacting the firm (phdequitypartners.com).

James Dow, chief executive of PHD, said: “With demand in the classic car market showing little sign of diminishing, we are very excited to offer this unique combination of an investment fund with the opportunity to drive these truly classic cars. Investment in rare classic cars offers diversification into a tangible asset class with often excellent historic returns on investment with comparatively low levels of volatility.”

Coins

Coins are one of the least widely collected investments, according to Knight Frank, yet record prices are being set for rare items at auction. For example, an Edward VIII 1937 gold proof sovereign sold for £516,000 in May this year at Baldwin’s, a world record price for any Royal Mint coin produced in the UK. It was sold as part of the Hemisphere Collection.

Steve Hill, director of British coins at Baldwin's said: "For the first time the Hemisphere Collection brought together sovereigns from every monarch, from the first sovereign struck under the reign of Henry VII to those of our current monarch, Elizabeth II. The Edward VIII gold proof sovereign that sold for a record breaking price was a fitting celebration of the iconic British denomination.”

The first stamp issued worldwide is reaching its 175th anniversary, and strong growth is expected again. Keith Heddle, managing director of Stanley Gibbons investments said: “As predicted, after some significant trading both privately and at auction in recent years, the GB stamp market slowed slightly last year with the GB250 growing 2.64pc in the last 12 months. However, we anticipate strong growth again as we head towards the mother of all stamp shows, the decennial London philatelic exhibition in 2020, and have already seen signs of this at auction. The 10 year performance – growth of 195.02pc – emphasises the virtue of viewing rare stamps as a long-term investment.

“The best performer in the GB250 was a Queen Victoria nine pence stamp, the 9d pale straw, which rose in value by 33.3pc from £15,000 to £20,000.”

If you want to invest in stamps without shelling out to buy them directly, Stanley Gibbons offers an option to invest with an initial investment of £1,000 with a minimum quarterly payment of £300 thereafter (stanleygibbons.com).

Fine wine

If you have a significant portfolio and cash to spare, you can invest directly into fine wines by buying rare bottles for your own cellar; but, if not, you can also invest in wine funds.

One – the Wine Investment Fund – has a strategy of only investing in wines from Bordeaux Chateaux as these are producing limited supplies of wine from just 35 parcels of land, which increases the quality and rarity. It will not buy bottles en primeur – where the vintage is presold in March and April before even being bottled – as the prices are too volatile, according to Andrew della Casa, the founding director of the Wine Investment Fund.

Since its launch in 2003, the investment fund has seen a rise of more than 117pc in its net asset value, although in the past three and a half years the performance has fallen rather than risen, which shows it is not a one-way investment choice.

Fine wine – like a classic car – is considered a ‘wasting asset’ under UK tax rules, so any gains do not attract capital gains tax. This could be a benefit if you are an expat with a UK tax liability. As with any investment, you should take independent financial advice.